UPDATE 1-Kenya central bank holds main rate, sets new rate for banks

* New rate is basis for banks to price commercial loans (Adds comments from the committee statement)

NAIROBI, July 8 (Reuters) - Kenya’s central bank said on Tuesday it was holding its key lending rate at 8.50 percent, in line with forecasts, saying inflation remained in a target range and the pace of price rises had slowed.

Eight out of 11 analysts polled by Reuters had expected no change. Three expected an increase of 50 basis points.

The central bank also announced that the new Kenya Banks Reference Rate (KBRR), which is to be the basis for banks to price their commercial loans, would be set at 9.13 percent. The rate is effective from July 8 and will be reviewed in January.

“The Committee concluded that the monetary policy measures had continued to deliver the desired price stability as overall inflation remains within the target range,” the bank said in a statement after its Monetary Policy Committee met.

“In addition, the rise in overall inflation has slowed down,” it added.

Inflation crept up to 7.39 percent in the year to June, inching closer to the 7.5 percent upper limit of the government’s target. The government aims to keep inflation at 5 percent, plus or minus 2.5 percentage points.

The new reference rate for banks is being launched as part of an effort to lower commercial lending rates, which businesses have long complained are too high and say are stifling activity.

“The KBRR was developed as part of the recommendations to enhance the supply of private sector credit and mortgage finance in Kenya by facilitating a transparent credit pricing framework,” the statement said.

“It will be the base rate for all commercial banks’ lending,” it said, adding that the next review would be in January “if conditions do not drastically change.”

Commercial lending rates in the east African nation have stood at 21 percent on average, while deposit rates average under 10 percent, angering consumers who accuse banks of taking too much profit. It is a common complaint in Africa.

Under the new system, while lenders will be required to use the reference rate as a base rate, they can vary premiums depending on the credit profiles of customers. Kenya has been slowly improving its credit rating system.

The rate is reviewed every six months, unless circumstances demand otherwise, and is calculated from the average of the CBR and the weighted 2-month moving average of the 91-day Treasury bill rates. (Writing by Edmund Blair; Editing by Drazen Jorgic/Ruth Pitchford)